All posts by DuaneMorris3

May Health Plan Administrators Recoup Overpayments From Providers Through Cross-Plan Offsetting? One Federal Appeals Court Is Skeptical.

By Christopher Crosswhite

Health insurance conglomerates like UnitedHealth Group, Aetna, and Anthem administer benefits and process medical claims for thousands of employee health insurance plans that are governed by the Employee Retirement Income Security Act (“ERISA”).  Similarly, most health care providers furnish services to beneficiaries of numerous health insurance plans, meaning that the providers’ claims for payment are frequently processed and paid by companies like UnitedHealth, Aetna, or Anthem, acting as administrators for these plans.  Beginning in 2007, UnitedHealth began a practice known as “cross-plan offsetting” in order to more easily recoup overpayments it had made to providers that were not in the health plans’ networks.  Under cross-plan offsetting, an administrator for multiple health plans offsets overpayments made to an out-of-network provider under one health plan against the payments owed to that same provider under other health plans of that administrator.  Cross-plan offsetting arises more often in the case of overpayments to out-of-network providers because health plans’ contracts with in-network providers usually permit recoupment of overpayments by withholding payment for subsequent services furnished by the in-network provider, and the in-network provider will generally furnish services to a plan’s beneficiaries much more often than an out-of-network provider will.

Some out-of-network providers have brought class actions on behalf of health plan beneficiaries challenging the legality of cross-plan offsetting.  In a decision issued on January 15, 2019, the U.S. Court of Appeals for the Eighth Circuit ruled against UnitedHealth’s practice of cross-plan offsetting, finding that cross-plan offsetting was not authorized by the documents of the health plans in question.  Peterson v. UnitedHealth Group, Inc., 2019 U.S. App. LEXIS 1270 (8th Cir.2019).  Before addressing the merits of the challenge to cross-plan offsetting, however, the Eighth Circuit first addressed whether Dr. Peterson, the out-of-network provider bringing the class action on behalf of his patients, had standing as the representative of his patients to bring an action under ERISA.  Health care providers generally do not have standing to bring an action under ERISA on their own behalf to recover benefits due under a health plan; instead, they must bring such an action under an assignment from the plan’s beneficiaries or as their representative.  UnitedHealth contended that Dr. Peterson could not act as his patients’ representative because he had not adequately disclosed a conflict of interest relating to balance billing for out-of-network services.  In rejecting this argument, the court found that having UnitedHealth pay for Dr. Peterson’s services “with money rather than with an offset” would be in both Dr. Peterson’s interest and the patients’ interest if the offset was not a valid payment of their obligation for the services.  2019 U.S. App. LEXIS 1270, *10-11.  The court also found that the engagement letter signed by the patients adequately explained the potential conflict of interest.

The Eighth Circuit also rejected UnitedHealth’s interpretation of the plan documents as authorizing cross-plan offsetting.  While recognizing that the documents of the various plans granted UnitedHealth broad authority to interpret and administer the plans, the court concluded that the text of the plan documents provided no basis for authorizing cross-plan offsetting.  The court further observed tension between the practice of cross-plan offsetting and the requirements of ERISA:

While administrators like United may happen to be fiduciaries of multiple plans, nevertheless “each plan is a separate entity” and a fiduciary’s duties run separately to each plan.  Standard Ins. Co. v. Saklad, 127 F.3d 1179, 1181 (9th Cir. 1997).  Cross-plan offsetting is in tension with this fiduciary duty because it arguably amounts to failing to pay a benefit owed to a beneficiary under one plan in order to recover money for the benefit of another plan.  While this benefits the later plan, it may not benefit the former.  It also may constitute a transfer of money from one plan to another in violation of ERISA’s “exclusive purpose” requirement.  29 U.S.C. § 1104(a)(1).

2018 U.S. App. LEXIS 1270, *14-15.  Although the Eighth Circuit did not specifically rule that cross-plan offsetting violated ERISA, it expressed skepticism regarding interpretations of plan documents “that authorize practices that push the boundaries of what ERISA permits.”  2018 U.S. App. LEXIS 1270, *15.  This skepticism led the court to conclude that UnitedHealth’s interpretation of the plan documents was not reasonable and to uphold the district court’s grant of partial summary judgment in favor of the class action plaintiffs.

Christopher Crosswhite is a partner at Duane Morris’ Washington D.C. office who practices in the area of healthcare law.

Non-Competition Clauses – Make No Assumptions

By Patricia S. Hofstra

The enforceability of non-competition clauses depends on a number of factors. Non-competition clauses are viewed in the context of anti-trust laws as a restraint of trade and disfavored.  Consequently, the entity seeking to enforce a non-compete must be able to prove a legitimate business reason for the non-compete. A number of states flat out prohibit non-competition agreements, while other states enforce non-competition agreements on a case by case basis. In some states where non-compete provisions that restrict the physician’s right to practice medicine are considered void and not enforceable as a matter of law, employers may be able to sue the departing physician for monetary damages suffered because of the competition. Continue reading Non-Competition Clauses – Make No Assumptions

SUPPORT Act Expands Sunshine Act Disclosure Requirements, Covered Recipients

On October 24, 2018, President Donald Trump signed the Substance Use-Disorder Prevention that Promotes Opioid Recovery and Treatment for Patients and Communities Act (SUPPORT Act), a combination of a number of previously passed House and Senate bills related to addressing the opioid crisis. One of the provisions of this lengthy bipartisan package of bills includes an expansion of the disclosure requirements initially imposed by the Physician Payments Sunshine Act.

Read the full text of this Alert on the Duane Morris LLP website.

Physician Compensation

By Patricia S. Hofstra

Today’s blog addresses compensation and benefits; a complicated subject of upmost interest to our clients. The blog touches on major points to consider regarding compensation and benefits. Physicians and physician groups must consult with compensation experts and legal counsel to insure that they understand the best possible, regulatory compliant compensation model for their needs. There are pros and cons and multiple variations of each model.  Continue reading Physician Compensation

Contractual Indemnification – DANGER

By Patricia S. Hofstra

Indemnity provisions are used to shift risk from one party to another. The intent of an indemnification provision in an agreement is to impose on one party the responsibility to pay the liability, damages, costs, expenses, and attorney fees for the other party to the agreement, under the circumstances set forth in the agreement.  An indemnification clause obligates one party to compensate the other party for losses or damages. This compensation is separate and apart from other contractual obligations and damages.  Continue reading Contractual Indemnification – DANGER

Settlement of the Osteopathic Physicians Class Action Against the American Osteopathic Association

Duane Morris is very pleased to announce the settlement of the Osteopathic Physicians Class Action against the American Osteopathic Association, Talone, et. al v. American Osteopathic Association.  The Court has granted preliminary approval of the settlement, and members of the class and sub-classes will be receiving notice of the settlement in the coming weeks.

The settlement is a resolution of the claims the class representatives asserted against the AOA that was negotiated over a period of approximately four months, and that provides a range of benefits to tens of thousands of DOs.  Those benefits are estimated in value to be worth significantly more than $35,000,000.

Please see our announcement for more information.

 

CMS Retreats on Jurisdiction for Medicare Provider Reimbursement Appeals of Self-Disallowed Items, But How Far?

By Christopher L. Crosswhite

On April 23, 2018, the Administrator of the Centers for Medicare and Medicaid Services (“CMS”) adopted a new ruling conceding the jurisdiction of the Provider Reimbursement Review Board (“PRRB”) in certain circumstances over costs or items “self-disallowed” by the provider. In Ruling No. CMS-1727-R (the “Ruling”), the Administrator announced that the PRRB has jurisdiction over a provider’s appeal regarding Medicare payment for an item that the provider did not include in its cost report when the following circumstances exist:

  1. The appeal is pending on or after April 23, 2018, or was initiated on or after that date; and
  2. The cost reporting period under appeal ended on or after December 31, 2008, and began before January 1, 2016; and
  3. The provider had a good faith belief that the item was not allowable under Medicare regulations or payment policy.

This Ruling represents a retreat from regulations adopted in 2008, which required that in order to appeal an item to the PRRB, a provider must either claim Medicare payment for the item in its cost report or include the item as a protested amount in the cost report. CMS took the position that a provider could not be “dissatisfied” with the Medicare contractor’s determination of Medicare reimbursement, as required by the statute for a PRRB appeal, if the contractor made no determination on the item because it was not included in the cost report, even if reimbursement was prohibited under Medicare policy. The Ruling indicates that CMS is retreating from this position because of the 2016 decision of the U.S. District Court for the District of Columbia in Banner Heart Hospital v. Burwell, which held that the PRRB had jurisdiction over the hospitals’ challenge to Medicare outlier payment regulations despite the hospitals’ failure to claim protested amounts related to their challenge. The district court found that a cost report claim for additional outlier payments would have been futile because the Medicare contractor had no authority or discretion under the outlier payment regulations to make payment as sought by the hospitals. The Ruling states that CMS has decided to apply the holding in Banner Heart in similar administrative appeals.

The Ruling does not entirely do away with the requirement of including an item in the cost report in order to pursue Medicare reimbursement for it in a subsequent appeal. First, the Ruling applies only if the cost reporting period under appeal began before January 1, 2016. This end date is not coincidental—for periods beginning on or after January 1, 2016, CMS has simply shifted the requirement that an item be included in the cost report from being a prerequisite for PRRB jurisdiction to being a so-called “general substantive requirement” for Medicare payment. Second, the Ruling applies only where the provider had a good faith belief that the item was not allowable. The Ruling indicates that “a provider would rarely be able to demonstrate a good faith belief that an item is not allowable when that item is actually allowable under a Medicare payment regulation or other policy.”

Unfortunately, the Ruling may muddy the waters regarding the use of protested amounts in the Medicare cost report. The Ruling acknowledges that providers sometimes claim items through protested amounts “out of concern that a cost report claim for reimbursement of an item deemed non-allowable might raise program integrity questions.” Notwithstanding the Ruling, “a provider still may elect to self-disallow a specific item deemed non-allowable by filing the pertinent parts of its cost report under protest.” But the Ruling then states as follows:

“However, if the PRRB… were to determine that, despite the provider’s self-disallowance of the specific item under appeal, the Medicare contractor actually had the authority or discretion to make payment for the specific item at issue in the manner sought by the provider on appeal and the provider did not demonstrate a good faith belief that such item is not allowable, then the [PRRB] shall apply the Third implementation step for this Ruling.”

Under the third implementation step, the provider’s appeal of the item is to be dismissed for failure to meet the “dissatisfaction” requirement for jurisdiction. One problem with this statement is that providers sometimes claim items as protested amounts where the Medicare contractor has disallowed the item in previous cost report audits for lack of sufficient documentation. The adequacy of documentation to support reimbursement is one area where the Medicare contractor would seem to have discretion to allow payment. Why would CMS want to discourage providers from taking a cautious approach in claiming items in the cost report that have been disallowed in previous audits?

Christopher L. Crosswhite practices in the area of healthcare law, concentrating on Medicare and Medicaid law and regulations, Medicare reimbursement controversies and appeals, and healthcare fraud and abuse provisions.

PA Supreme Court Significantly Narrows Application of State’s Peer Review Protection Act

By Lisa Clark and Samantha Dalmass

On March 27, 2018, the Pennsylvania Supreme Court held in a 4-3 decision that the Pennsylvania Peer Review Protection Act (“PRPA”) would not prevent the disclosure of certain physician performance review files in an ongoing medical malpractice lawsuit despite arguments that the files in question were precisely the kind of peer review documents that the PRPA was intended to protect. This controversial decision limits the protection available to healthcare providers under the narrow PRPA evidentiary privilege and may significantly affect the manner in which Pennsylvania hospitals conduct peer review activities.

The underlying lawsuit was brought in 2012 after plaintiff Eleanor Reginelli suffered a heart attack several days after being treated by Dr. Marcellus Boggs in the emergency room at Monongahela Valley Hospital (“MVH”) for gastric discomfort. The plaintiff alleged that Dr. Boggs failed to diagnose and properly treat an underlying and emergent heart condition before discharging her from MVH. She and her husband filed a four-count complaint in 2012, asserting claims against Dr. Boggs, MVH and UPMC Emergency Medicine, Inc. (“ERMI”), which provides staffing and administrative services for the MVH emergency room.

Dr. Boggs and the other physicians in the MVH emergency department, including Dr. Brenda Walther, were members of the medical staff at MVH and employed by ERMI. Dr. Walther served as the director of the MVH emergency department and supervised the ERMI-employed emergency department physicians working at MVH. When she was deposed during the discovery phase, Dr. Walther revealed that she had prepared and maintained a performance file on Dr. Boggs as part of her regular practice of reviewing randomly selected charts associated with ERMI-employed emergency department physicians. The Reginellis responded by filing discovery requests directed at MVH, seeking production of the complete performance review file for Dr. Boggs.

MVH opposed the motion to compel and argued that the requested items fell squarely under the protection of the PRPA because they had been created and used for the purpose of reviewing the services rendered in the MVH emergency room. This argument was subsequently rejected by the trial court, and the plaintiffs’ motion to compel was granted. At this point, ERMI and Dr. Boggs entered the discovery proceedings and filed a motion for a protective order, asserting entitlement to claim protection under the PRPA for the peer review work performed by an ERMI employee. ERMI argued that the performance file on Dr. Boggs fell outside of the peer review responsibilities that ERMI performed for MVH and that Dr. Walther had created and maintained the file solely on ERMI’s behalf. However, this was not consistent with the motion for reconsideration filed by MVH in which the hospital alleged that Dr. Walther conducted the peer review work on behalf of both ERMI and MVH. Then, before the trial court could rule on the motions filed by MVH and ERMI, both entities appealed the trial court’s decision to compel production to the Superior Court.

The relationship between ERMI and MVH and the inconsistent claims regarding the performance review files were critical on appeal, and the Superior Court upheld the trial court decision that neither ERMI nor MVH were entitled to the evidentiary privilege. The lower court found that ERMI was acting as an independent contractor and, therefore, did not qualify as an entity enumerated in the PRPA as protected by peer review privilege. It also held that MVH could not claim privilege based on the finding that MVH had neither generated nor maintained the performance file for Dr. Boggs.

Both ERMI and MVH appealed the decision, but in the 26-page opinion written by Justice Donahue, the Pennsylvania Supreme Court held that neither entity was in a position to claim the PRPA’s evidentiary privilege.

The Pennsylvania Supreme Court first considered whether ERMI could claim entitlement to protections under the PRPA. The PRPA defines “peer review” as the “procedure for evaluation by professional health care providers of the quality and efficiency of services ordered or performed by other professional health care providers.” The court’s analysis hinged on whether ERMI could hold itself out as a “professional health care provider,” which is defined under the PRPA as “individuals or organizations who are approved, licensed or otherwise regulated to practice or operate in the health care field under the laws of the Commonwealth of Pennsylvania.” There are 12 types of entities enumerated in the statutory definition, including hospitals and physicians. The court said that although it described itself as a “physician organization comprised of hundreds of individual emergency medical physicians… that exists specifically to provide emergency medical services,” ERMI could not claim to be any of the 12 listed entities set forth in the statutory definition. The court said ERMI was not a “professional health care provider” because it was not approved, licensed or otherwise regulated to practice or operate in the healthcare field in Pennsylvania, and it did not become one merely because one of the professional healthcare providers it employed conducted an evaluation of another.

After holding that EMRI could not claim the evidentiary privilege because it did not qualify as a “professional health care provider,” the court addressed whether the PRPA was available to MVH. Although MVH clearly met the statutory definition of “professional health care provider,” the court declined to afford it protection under the PRPA on the grounds that Dr. Walther had not been established as member of the hospital’s peer review committee and the PRPA’s evidentiary privilege is reserved only for the proceedings and documents of a review committee. MVH had previously stated that Dr. Walther acted as a “separate” peer review committee for the ERMI-supplied emergency department physicians, which led the court to conclude that Dr. Walther had conducted peer review activities as an individual. Based on the majority’s interpretation of the PRPA, individuals conducting peer review may qualify as a “review organization” but not as a “review committee” engaging in peer review.

Notably, the court further explained that the PRPA does not extend its grant of the evidentiary privilege to the category of review organization enumerated in the second sentence of the statutory definition of “review organization.” This category includes “any hospital board, committee or individual reviewing the professional qualifications or activities of its medical staff or applicants for admission hereto.” The court expressly identified credentials review as falling outside the scope of peer review privilege under the PRPA.

The court then addressed the argument that the performance files were entitled to peer review protection because the hospital had contracted with ERMI to perform its peer review activities. MVH pointed out that this type of relationship was very common, and hospitals would struggle to survive if they were not able to contract with outside entities like ERMI to fulfill peer review responsibilities. MVH argued that ERMI was contractually bound to perform peer review activities on its behalf. However, the court found this argument lacked merit because it was inconsistent with earlier arguments made by ERMI and unverifiable since neither MVH nor ERMI had thought to include the emergency services contract in the record. Although the Court recognized that no statutory provision exists to preclude a hospital from entering into a contact with a staffing and administrative services entity to conduct peer review services for the hospital’s peer review committee, it refused to consider the issue without conclusive documentary evidence.

In a dissenting opinion, Justice Wecht found the conclusions made by the lower courts and the majority to be at odds with the intent of the legislature in creating the peer review privilege. The dissent found that ERMI did, in fact, qualify as a professional healthcare provider and went on to say that “the majority’s contrary interpretation guts the privilege, given that such contractual staffing and administrative agreements are commonplace.” Justice Wecht also expresses concern about the destabilizing effect of the majority’s reliance on “less than clear” statutory definitions.

This decision has significant implications for healthcare providers in Pennsylvania, especially hospitals and physician groups that contract with outside entities to perform peer review activities. The Supreme Court left the question open as to whether such relationships are permitted and whether the PRPA would apply to peer review documents produced by an outside peer review entity on a provider’s behalf. Therefore, hospitals should carefully evaluate any contracts related to peer review services to make sure that the provisions clearly spell out that such services are performed on the hospital’s behalf. Hospitals may also want to evaluate policies and procedures relating to credentials review as the majority opinion seems to have eliminated the evidentiary privilege for such review activities, finding them to be outside of the scope of peer review protection.

Lisa Clark is a partner in Duane Morris’ Healthcare Law practice with specific focuses in health information technology, regulatory compliance and reimbursement matters for hospitals, physicians and other healthcare providers; software developers and investors in HIT and healthcare products and services; and subcontractors and vendors providing services to the healthcare industry. 

Samantha Dalmass is a law clerk at Duane Morris, currently pursuing her J.D. and a Master of Public Health at Drexel University.    

False Claims Act Enforcement Activity Continues

By Susan V. Kayser

New U.S. Department of Justice (DOJ) statistics released in January 2018 show that False Claims Act (FCA) whistleblowers who are not joined by the DOJ in their lawsuits reaped $898 million in proceeds in 2017, far greater than the $425 million initially reported by the DOJ. However, in a coincidental turn of events, just hours after the new statistics were released a Florida federal court judge overturned a $350 million FCA verdict against a nursing home operator, Salus Rehabilitation, LLC. Accordingly, the DOJ statistics will likely be revised again to reflect 2017 proceeds of $548 million for whistleblowers.

The ruling in the Salus Rehabilitation case is itself worthy of attention. The Salus whistleblower alleged record-keeping violations and a scheme to boost Medicare and Medicaid reimbursement by exaggerating the medical needs of nursing home residents. Overriding a jury verdict, U.S. District Court Judge Steven D. Merryday ruled that a whistleblower’s allegations that the provider defrauded Medicaid were not sufficient to sustain a hefty FCA judgment. He wrote “… the evidence and the history of this action establish that the federal and state governments regard the disputed practices with leniency or tolerance or indifference or perhaps with resignation to the colossal difficulty of precise, pervasive, ponderous, and permanent record-keeping in the pertinent clinical environment.”

In making his ruling, Judge Merryday relied heavily on Universal Health Services v. Escobar, a 2016 U.S. Supreme Court ruling that established a set of requirements that must be met before a FCA judgment can be brought against a provider. Among the requirements are that the government and whistleblowers must show the government would not have paid the underlying claims if it knew of the regulatory violations alleged. The Escobar decision found that continued government reimbursement after fraud allegations are made is strong evidence that the allegations are not material. Judge Merryday noted that in the Salus case the government continued to pay for services rendered and stated that the whistleblower did not provide enough evidence to prove that Medicaid reimbursement would have stopped even if the government were aware of paperwork problems at the Salus facility. Clearly, the Salus decision is a victory for providers.

New York Times Critical of Nursing Home Arrangements with Related Companies

By Susan V. Kayser

The New York Times reported on January 2, 2018, that according to financial disclosures to Medicare, nursing home contracts with related companies accounted for $11 billion of nursing home spending in 2015. According to the report, this amounts to a tenth of nursing home costs. The basis of the Times report was an analysis undertaken by Kaiser Health News. The Times article, which focused on care problems encountered by a family at a New York nursing home, was critical of related-company arrangements, saying that they allow nursing home owners to arrange contracts where the nursing homes pay more than they might in a competitive market. Further, the article said, owners can “siphon off” profits that are not recorded on the nursing home’s books. The Times report stated that the Kaiser Health News analysis found that nursing homes doing business with related companies (1) employ, on average, 8 percent fewer nurses and aides; (2) were 9 percent more likely to have hurt residents or immediate jeopardy findings; (3) had 53 substantiated complaints for every 1,000 beds, compared with 32 per 1,000 beds where no related party arrangements were in place; and (4) were fined 22 percent more often for serious health violations and penalties at an average of $24,441, a rate 7 percent higher than homes with no related-party arrangements. The Kaiser analysis also found that for-profit nursing homes use related company arrangements more frequently than nonprofit corporations.